Emotions don’t have to rule investors
In case you didn’t notice, yesterday (March 9) was the two-year anniversary of the start of the latest run-up in the stock market. Since March 9, 2009, the S&P 500 index has risen from 676.53 to 1,318 — a 95% gain! Think about it. The S&P 500 index has almost doubled in value in two short years!
But wait a minute. How did you feel about your investments two years ago? Were you excited about the future? How about scared to death and about ready to pull the plug on your investments? Or maybe somewhere in between?
Truth be told, I was nervous about my investments and those of all my clients. The key for me was to recognize my nervousness and remind myself that I have a plan in place for my investments and the same for all my clients and that if I stuck with the plan, everything would probably be fine. And what was the alternative? Bail? Not a good choice, so I stuck with my plan, urged my clients to do the same and here we are.
The point in this walk down memory lane is to point out that we can’t take emotions out of our investing because we’re human beings. But we can manage our emotions by having a sound investment plan and committing, yes, committing to sticking with the plan. This approach will see you through the dark nights like the one that occurred on March 8, 2009 and will again when the next euphoric investment bubble makes it seem like you’re the only one not investing in whatever the next big thing is. We are affected by emotions, but we don’t need to be ruled by them.